Short-Term and Long-Term Impact of Sarbanes-Oxley Act on Director Commitment and Composition of Corporate Board Committees

This study analyzes the short-term and long-term effects on director commitment and composition of board committees following the passage of the Sarbanes Oxley Act of 2002. The first issue we address in the paper is “director commitment”, i.e., whether corporate directors were more or less committed in terms of time and effort to their “directorship” assignment after the passage of the Sarbanes-Oxley Act. The second issue that will be examined in this study is the composition of board committees (namely, Audit, Compensation, Executive, Governance, and Nominating Committees) before and after Sarbanes-Oxley. The research intends to answer some of the following questions: Has Sarbanes-Oxley changed the boards' structure? Have firms focused more on certain functions of the Board relative to the others after the Act was passed? Using over 124,000 observations in our sample period (covering both pre and post Sarbanes Oxley Act of 2002) from Board Analyst Database, we analyze the trend in each of these variables over time.We run statistical tests to compare the trends in each variable before the Act was passed to the period after it was passed